Performance statement: Coming together to shape the future
With the FASB and IASB in the throes of a major review of the structure of performance reporting, this is a highly timely survey of the views of both investment professionals and corporate management on the critical building blocks of information required to assess performance. What data analyses are held to be critical? Is GAAP meeting their needs? What can management do to mitigate current informational shortfalls within the existing reporting framework? Is the proposed direction of travel of the standard setters likely to result in a performance statement that better meets user needs?
'Performance statement: Coming together to shape the future' offers important insights into the adequacy of communication with the capital market, with pragmatic suggestions into areas where better reporting could increase investors confidence in management’s performance.
Top level observations include:
- The high degree of congruence between the views expressed by investment community participants and corporate respondents.
- Whilst acknowledging that all of the primary statements are important, respondents from both the corporate and investment communities rank the income statement as the most important of these statements. In their opinion, it offers the best insight into the performance of a company over a given period of time.
- Both investment professionals and corporates stress the need to be able to distinguish "underlying" earnings from both one-off events (such as a gain from the sale of a business) and the impact of the re-measurement of assets or liabilities.
- They believe that the earnings number is useful and largely agree upon how that number should be defined.
- Non GAAP is held to be valuable by the vast majority of respondents from both the investment community and from companies, though it was widely held that some ground rules should govern their use.
- The only key areas of divergence lie in tax reporting and how segments should be identified.
